PaperlinX writes it on the wall - it's bankers first

PAPERLINX has given its best sign yet that the company is being managed for its bankers first, and shareholders second, announcing that the sale of its US business had killed any lingering hopes investors might have had for a private equity takeover.

Insider wonders whether the ASX might pop the question to PaperlinX's board on whether it could have announced earlier to investors some of the details in yesterday's statement.

Long-suffering shareholders have nurtured a hope, increasingly faint, that the ''whole of company proposal'', pitched at 9¢ an ordinary share and $21.85 for preference stock by private equity group Platinum Capital, might still be alive.

Judging by yesterday's statement the concept was alive all the way until a deal was tied with US competitor Central National-Gotesman Inc: ''As a consequence of today's announcements, PaperlinX is no longer in discussions with any third parties.''

Somehow though, game buyers of the preference stock managed to push it up $1.19 to $9.35 - perhaps on the basis that the company exercised the ''step-up'' clause, which means the dividend rate is now fattened by 2.25 percentage points to the Bank Bill Swap Rate plus 4.65 per cent.

That is very nice in theoretical yield terms, but PaperlinX is not paying a distribution, and has given little sign of plans to do so.

PaperlinX also said the US sale was priced at 7.5 times earnings before interest, tax, depreciation and amortisation, which implies that the operation was making $US10.3 million this year. The company runs a North American division, which includes Canadian operations generating $C450 million of revenue and having 27 per cent of that market.

EBITDA for North America was $14.5 million in 2011, and PaperlinX's most profitable business, and for the December half made about $9.3 million of EBITDA - suggesting the US operation was holding its own in a tough world. Strategically, that means PaperlinX is jettisoning the good to pay the price of trying to fix the bad. While the European operations generate about three times the revenue of North America, they are also the big drag.

Insider wonders how that will play with the disenchanted shareholder group, led by Andrew Price, that tried unsuccessfully to roll chairman Harry Boon off the board in March. The remaining institutional investors, such as Allan Gray's Simon Marais, will no doubt be doing their own calculations on PaperlinX's numbers after yesterday.

The half of the US sale money that does not go to repaying bank debt will pretty much be absorbed in Europe's restructuring. On that note, PaperlinX tried to suggest it is undergoing hefty redundancy programs in Europe and, while it is appreciated that one job lost is significant if it is one's own, it seems odd that the head-count numbers being used date back two years.

It said the number of people to be ''disemployed'' will fall from 5435 in July 2010 to 4500 by July 2014 - not what Insider would judge a great achievement in cost-cutting.

Christmas finally comes

ANOTHER week, another dodgy website trading platform promoter put out of business by the Australian Securities and Investments Commission.

The pogrom by ASIC chairman Greg Medcraft's team has gathered pace in recent weeks, although yesterday's announcement on purported CFD trader Australia AFT Finance Market was the finalisation of work begun well before last Christmas.

In November ASIC revealed that the Federal Court had granted it orders stopping the group from trading, and frozen $180,000 in a bank account. It also had associated websites shut down.

You have to love persistence because someone controlling Australia AFT (the only one of four related ''companies'' actually registered), changed its name in December to Stone Assets Management. Insider wonders whether they were hoping the winding up application against it, also being run by ASIC, would go away. It did not, although it did take until the end of last week for liquidation orders and final declarations of naughtiness to be made.

The sole director of the company, according to ASIC records, was a Qing Liang, who was not an Australian resident but mostly gave an Adelaide address. In December the address was changed to a post office box in Sydney's Ashfield, which seems to be the same as one associated with law firm Wang & Associates. Wang has an association with a real, licence-holding trading company called Aetos Capital, and at least one internet ad attached to the banned Australia AFT points to the Aetos website.

Aetos's compliance officer, Eugene Chan, told Insider last night that since being told about the link he had contacted the jobs website to ask for its removal. He said the company previously had found whole portions of its website being copied and used by phishers of men, and women.